1/ When traders on @THORChain are fearful, they are willing to pay much higher slip fees. This is great news for LPs and their profits.
More generally, market crashes are some of the most profitable times for THORChain LPs.
More generally, market crashes are some of the most profitable times for THORChain LPs.
2/ Hello my fellow Thorchads and chadettes! MCCN's return is on the horizon, so I have been diving into the data to see what I can uncover! This Data Digest dives deep into fee revenues, and sees how the slip-based model plays out in practice.
alexsimpson96.medium.com/thorchain-data…
alexsimpson96.medium.com/thorchain-data…
3/ A total of 237,868 $Rune paid out in fees from MCCN launch to first system halt. BUSD is top earner.
BTC and ETH are also high earners, but less so than might expect. Together are 37% of liquidity, but just 28% of fees earned.
This plot shows fees earned for all pools:
BTC and ETH are also high earners, but less so than might expect. Together are 37% of liquidity, but just 28% of fees earned.
This plot shows fees earned for all pools:
4/ BUSD is top performer for two reasons.
First, demand for stable coins was very high in recent market crash. This increases volume, and hence fees earned.
Second, BEP2 pools have low fees. This increases arbitrage opportunities, again increasing volume and fees earned.
First, demand for stable coins was very high in recent market crash. This increases volume, and hence fees earned.
Second, BEP2 pools have low fees. This increases arbitrage opportunities, again increasing volume and fees earned.
5/ Market crashes are a great time to be a Thorchain LP.
This plot shows fee revenues against Rune price. Crashes in Rune price correspond to large spikes in fee revenues.
Combining this with plots of stable coin pool earnings (6), it is clear what is driving this.
This plot shows fee revenues against Rune price. Crashes in Rune price correspond to large spikes in fee revenues.
Combining this with plots of stable coin pool earnings (6), it is clear what is driving this.
6/ Here we have plots of stable coin fee revenues.
The peaks in fee revenues correspond exactly with the peaks from (5). This is because in market crashes, traders flood to stable coin pools to try and protect their portfolio.
The peaks in fee revenues correspond exactly with the peaks from (5). This is because in market crashes, traders flood to stable coin pools to try and protect their portfolio.
7/ This pattern is unique to stable coins. Looking at BTC plot for example, earnings are much more consistent across all market conditions.
BTC fee revenues still increase from market crashes, since investors cash out a portion of their BTC to stable coins, but less noticeable.
BTC fee revenues still increase from market crashes, since investors cash out a portion of their BTC to stable coins, but less noticeable.
8/ The second factor driving accelerated fee revenues in market crashes is slip fees.
When investors panic, they are willing to accept much higher slip fees. This is great news for Thorchain LPs.
When investors panic, they are willing to accept much higher slip fees. This is great news for Thorchain LPs.
9/ When Rune crashed from its ATH, slip fees spiked. This corresponded with a drop in market sentiment from greed to extreme fear.
USDT slip fee peaked at 0.7%, up from 0.35% average. USDC peaked at 0.89%, up from average of 0.26%. BUSD reached 0.3%, up from 0.06% average.
USDT slip fee peaked at 0.7%, up from 0.35% average. USDC peaked at 0.89%, up from average of 0.26%. BUSD reached 0.3%, up from 0.06% average.
10/ Slip fees in ETH and ERC-20 pools are much higher than others.
This provides a much needed boost in revenue for these pools.
As I have explained before, BEP2 pools are top performers due to arb opportunities. However, ERC-20 pools benefit most from slip model.
This provides a much needed boost in revenue for these pools.
As I have explained before, BEP2 pools are top performers due to arb opportunities. However, ERC-20 pools benefit most from slip model.
11/ Here is a plot of average slip for all pools against depth.
Unsurprisingly, as depth decreases, average slip increases. What is interesting here though is that ERC-20 pools have much higher slip than BEP2.
Average slip for ERC-20 pools is 0.84%, while just 0.10% for BEP2.
Unsurprisingly, as depth decreases, average slip increases. What is interesting here though is that ERC-20 pools have much higher slip than BEP2.
Average slip for ERC-20 pools is 0.84%, while just 0.10% for BEP2.
12/ Part of this difference is due to arbitragers. High gas fees on ETH and ERC-20 pools push up the size of a transaction necessary to find a profit in arbitrage, inherently pushing up the slip fee.
13/ Another part of this difference is due to tactical behaviour of LPs.
LPs have strong preference to asymm pool Rune in ERC-20 pools. This is likely because you can avoid high gas fees on deposits, which helps small investors.
Clear illustration of this is USDC and BUSD.
LPs have strong preference to asymm pool Rune in ERC-20 pools. This is likely because you can avoid high gas fees on deposits, which helps small investors.
Clear illustration of this is USDC and BUSD.
14/ USDC has total 2,457,796 Rune deposited to pool. 1,959,556 deposited as Rune, 498,239 as USDC. Ratio of almost 4:1 in favour of Rune.
BUSD by contrast has ratio 1.16:1.
This additional slip revenue gives ERC-20 pools a small and much needed boost in earnings.
BUSD by contrast has ratio 1.16:1.
This additional slip revenue gives ERC-20 pools a small and much needed boost in earnings.
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